The LNG Shipping Market in 2001 |
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2001 started as a truly
innovative year for LNG shipping, with a record number of ships on order
but ended with a hint of LNG "deja vu" when orders were
cancelled along with new ships on order without firm employment and
three firm commitments to Enron looking very doubtful.
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So
what happened? |
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The concept of short-term contracts and spot
trading was fuelled with extraordinary high US gas prices (+$10 mmbtu in
January 2001). The rush was on and an industry that had been shipping
constrained, risked being stalled due to lack of newbuilding slots at the
yards. By June 2001 it was almost impossible to have a choice of a yard
for a 2005 delivery slot, and naturally prices started to rise.
The bright light of the year was the knowledge that this publication
appears to be avidly read in Copenhagen when AP Moller finally joined the
other big LPG players (Exmar and Bergesen) and ordered their first
speculative LNG ship of the new millennium at Samsung!
Otherwise, it was a year that should have had great expectations for
evolution but instead settled back into the LNG "status quo"
mode hopefully only as a temporary relapse.
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The
fleet |
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The fleet was only increased by one unit
taking the total active numbers to 128, but by the end of the year there
was a total orderbook of 47 units although it had been up to 49 before BG
cancelled one of its Samsung units and Tanker Pacific cancelled its very
optimistic attempt to enter the specialised LNG "club". BG had
previously negotiated the option to cancel its second ship at Samsung
without penalty but it would seem that Tanker Pacific faced a $10 million
penalty from Izar. This was perhaps a sharp reminder to shipowners trying
to enter the "club" that subscription rates are high!
LNG carriers fleet as at
01.01.2002
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Small capacities from 18,000 to
50,000 cbm |
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16
ships |
Medium capacities from 51,000 to
100,000 cbm: |
15 ships |
Large capacities above 100,000 cbm: |
97 ships |
We mentioned "deja vu" earlier and this was clearly
demonstrated when El Paso chartered in four new Daewoo ships from Exmar.
El Paso featured mainly in the collapse of the LNG industry in the U.S. in
the early 80's that resulted in ships being scrapped or mothballed for
several years. With long-term plans to order more ships and ambitious
floating re-gasification units planned, El Paso is clearly taking the new
LNG wave seriously with hopefully better results this time around.
The tendency has been to order new large ships but one very small ship
has been ordered in Japan whilst Gaz de France looks likely to order a new
74,000 cbm for its cross Mediterranean needs. Larger ships are also on the
agenda with Tokyo Gas ordering a 145,000 cbm ship from Kawasaki Heavy
Industries (KHI) and the Snohvit LNG project close to signing for three
147,000 cbm ships at Mitsubishi Heavy Industries (MHI), Mitsui (MES) and
Kawasaki (KHI).
Perhaps the most significant issue in the present orderbook has been
the re-emergence of the membrane technology. Out of the 47 ships on order
37 are membrane, or some 80 %. Potential future orders would suggest a
swing back to Moss with a probable eight to be ordered in the first
quarter of 2002, but there will be a new membrane system launched soon,
CS1, that may prove very attractive. The CS1 should offer increased cargo
capacity without increasing the external dimensions of the ship: that is
once this industry's reluctance to change is overcome.

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The
projects |
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2001 resulted in "more of the same"
as far as projects are concerned with no new project launched yet much
talk of expansion plans without any firm decision being made.
The Norwegian project, Snohvit, looked as if it may have received a
final go-ahead before the end of the year, but government elections and
new tax regimes caused a two-month delay. Project partners are eagerly
awaiting the parliament decision, expected by 7th March 2002, to see if
this ambitious project will finally fly. The high northern latitude of the
site makes this plant an LNG engineer's dream as he finally has cold
water cooling!
Angola was raising expectations early in 2001 for a 2005 start up but
by the end of the year this had slipped to 2007 at the earliest. No doubt
the merger of Texaco and Chevron has caused some delay but the
organisation of the proposed partnership with other oil companies in
Angolan waters is the main reason. Any further delay for Angola could have
long-term consequences as Nigeria may well surge ahead as the only real
African LNG exporter and as Nigeria LNG seeks financial closing for trains
four and five and talks of a new project near Escravos. War-torn Angola
could suffer from wary financial investors who try to minimise risk
exposure who could see Nigeria as a proven success story. Timing is
critical for LNG projects to be successful, and missed commercial
opportunities can cause years of delay.
Algeria continues in its usual format but there is talk of increased
production, but LNG may have to give way to pipeline investment with a
partnership that includes TotalFinaElf, proposing a second pipeline
connecting Algeria and Spain. RasGas has started its expansion to service
the Petronet LNG contract in India. Further expansion is planned for the
Italian Edison contract which unlike the fob Petronet agreement will be
ex-ship. The shipping contract for the Edison deal is now in the final
stages of tender with five shipowners hoping to be lucky in securing a
four-ship deal. Oman LNG was one of the projects suffering from the fall
out of Enron's Dabhol India collapse only months before the 20-year
delivery contract was due to start. Indications of problems emerged early
in 2001 when Enron was unable to receive due payment from the Maharashta
State Electricity Board for electricity supplied from its Dabhol power
plant (at that time fuelled by naphtha). The collapse of Dabhol also
caused some concern to Mitsui OSK who had a LNG ship on order at
Mitsubishi that was finally delivered in November 2001. This was the first
example of old LNG "deja vu", with a ship ordered but no longer
with a viable project. Fortunately a temporary (?) solution has been found
with the vessel now chartered to Oman LNG for ex-ship deliveries to new
short-term buyers for the lost Dabhol quantities. Abu Dhabi was also due
to supply LNG to Dabhol, for smaller quantities, but little has been
reported as to who or where these contract quantities will go. The western
markets can absorb the LNG but the market price may not satisfy the
exporter.
The first real LNG plant interruption in the industry's history due
to political unrest occurred early in 2001 when ExxonMobil shut down its
Arun plant in Sumatra (Indonesia) due to terrorist activities in the area.
The LNG buyers, however, hardly noticed the event as the other LNG plants
in south east Asia were able to assist and service the contracts between
themselves. The LNG "club" once again demonstrating its ability
to offer its members the true benefits of "membership".
Australia finally saw financial approval given for train four with
expected start up in 2004. Japanese buyers are once again the main
recipients of the gas, but no longer
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And
2002 ? |
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Perhaps the delayed innovations of 2001 will
materialise in 2002. Gaz de France should order a new diesel electric
powered vessel with the new CS1 membrane tanks: two new concepts in one
vessel, a major step for the LNG industry. With a delivery of 2005 we may
not see any other such orders until the new concepts have proven
themselves but at least progress is being made. This lead may be accepted,
as there has been great concern over recent years about the lack of
trained steam engineers for the steam turbine plants. However, our word of
caution is more towards the lack of trained LNG operators as with an
existing orderbook of 47 ships with a possible 16 this year, we are
looking to increase the number of LNG seafarers by about 1,500! Where are
these people coming from?
Alternative sources of propulsion must be the main area of
concentration for this decade as environmental issues assume greater
global importance. LNG ships are the only vessels in operation today that
consume an equivalent of about 180 tonnes per day: the oil industry
stopped using turbines in the mid-70's. The LNG carried may not offer
any pollution hazard but the 5-6,000 tonnes of heavy fuel oil could, let
us not forget that the cargo on board the 'Erika' was fuel oil
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Shipping and Shipbuilding Markets in 2001
I N D E X
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